AAPL Update

I'm covering AAPL, not because I really want to and see something I really like here, but because we have earnings tomorrow for their fiscal Q1 after the close and it's an influentially weighted stock on the NASDAQ 100 / QQQ.

 Looking at AAPL's chart with a 200-day moving average (blue) and a 50-day moving average (yellow), you'll probably notice the 200-day moving up and the 50-day as of right now, moving laterally, that should be a giveaway in itself if you didn't already pick it out on the chart, "Range".

Taking a closer look, you have a pretty clear resistance "area" around the psychological magnet (whole number) of $115 which just adds to the case for a head fake move.  If we went no further than this chart and didn't have any idea where the probabilities were as far as AAPL perhaps being accumulated for a much larger run higher or distributed and an expected move lower, the fact would still remain that Technical Traders are predictable in their actions when faced with certain situations like a clearly defined range and the more popular the stock, the higher the probability that some kind of head fake move will take place based on the range and using the predictability of Technical traders' reactions against them. I could dole out a scenario in which a head fake move could be used here in either an accumulation or distribution circumstance.

A lot of technical traders will only enter positions on price confirmation, say a breakout ABOVE the range at the coincidental psychological level of $115 (as a whole number that tends to attract our attention subconsciously). Professionals are well aware of Technical Analysis and how technical traders will rect long before the orders even show up in the book.

On a fundamentals basis, I don't have much to add as to AAPL, but I will say that the market is largely driven by perception, whether smart money looking at a great earnings report and poor guidance and selling off the asset because it looks like no matter what the company "did", the only thing that's important are the perceptions of what they will "do" moving forward.

From a dumb money point of view, earnings can blow be horrible and the perception that the instantaneous price reaction creates, defines the perception, the awful NFLX earnings recently are a great example of that. If you read the entire earnings report, at least I would not have expected NFLX to rally like that on that kind of a report, but as we have recently discussed, often the perception of the earnings report is created by the instantaneous price reaction, again see NFLX.

 Looking at the Trend Channel (weekly), I'd say a move below $104.65 on a 5-day closing basis, would be a significant changes of character in the trend. Otherwise, the Trend Channel has held the entire uptrend of 2014 without a single stop out.

From a multi-day 3C chart basis, we can see the 2012 distribution and top call we made back then that led to a -45% decline and we can see a double "W" bottom with a positive divegrence. The inline nature of 3C during the uptrend has been on the strong side, but recently it has moved to near exact reversion to the mean, still an overall positive looking trend, but clearly a change in character.

On a very long and strong 6 hour chart, we can also see that change in character from a relative negative divergence (weaker for vs leading, but still very strong on a chart this long) and a leading negative divegrence developing just after. This is a longer term look using multiple timeframe analysis, however if you look within the leading negative divegrence, you have a weaker, but still important relative positive divegrence at an area that also forms a "W" base and is in the range which draws a lot of attention and is ripe for a head fake move. Overall it would seem to me that there's a definitive change in these very long term charts toward the negative, however that head fake move above the range would be very enticing to me if I were pushing the buttons on short term price action. This "could" also set up a nice short trade that comes to you, of course we'd want to see evidence that there's distribution in to a move above the range, but that range sitting there is such a popular stock looks like a very high probability set up.

 On a 2 hour chart which is still exceptionally strong and important, the same change of character is seen as we saw above on the 6 hour chart and to a lesser extent, the slower to react, but very strong 2-day chart.

Note the relative 3C divergence in to the recent highs and a new lower low in 3C (leading). However we also have the same relative positive divegrence at the same area as the 6 hour chart above forming a "W" like base.

My suspicion would be for a head fake move above the $115 range, I would also suspect distribution in to higher prices and demand as technical traders buy on a confirmation breakout move.

 Looking at a 15 min chart which is far more detailed and still a very strong timeframes, it looks like there's a clear "W" base set up in that range, there's a slight negative as the $115 area is approached. Unless something has recently changed in AAPL expectations that were causing distribution of the base area that appears to have been put in place, I'd suspect this is to just back price off and not have a psychological trigger like $115 effectively trigger an early start or false start before earnings.

I see this same signal to an even stronger degree in the more detailed, shorter term 10 min chart, the white positive divergence would be the second base in the "W" bottom, again, unless something has changed since the 16th, I suspect this is to prevent a false start on a move > $115.

The 5 min chart shows the same thing as well.

Even the intraday 1 min chart shows a leading negative trend, but again, I suspect this is to prevent any false start above a psychological level.

The one thing that bothers me about these charts are the 10-15 min charts, those are pretty serious timeframes, not typically the kind of "steering" timeframe one would normally see to prevent a move just over $1 higher. I still suspect the highest probability is a break above $115. 

I also suspect based on the longer charts like the multi-hour (2 hour/6 hour) that there's a good chance the breakout is used as a head fake move, meaning sold in to. We can only get that kind of confirmation once we see such a move, but if that were the case, then depending on how strongly the charts moved, there could be a good case made for a trade that essentially comes to you. If those changes of character which are even evident on the Trend channel and price itself are telling us something, I'd lean a lot more toward distribution in to a move above $115 and potentially a trade (short) that could be entered in at a better price and as such, lower risk.

As an aside, we have seen some pretty unbelievable moves right in to earnings, GOOG gave a very strong signal only 15 minutes before earnings several years ago that ended up being key to the direction it took, call it a leak, call it price manipulation, but it was screaming.

I'd rather sit back with AAPL and let it tell us what it is doing and from there, make a determination as to whether there's a high probability set up that comes to you.